By Aaron E. Carroll, M.D.
The Wall Street Journal, Sept. 18, 2012
Whenever a debate begins on how to cut Medicare spending, someone “sensibly” suggests raising the eligibility age to 67 from 65. The reasons for this are always presented as obvious “facts”:
People are living so much longer than they did when Medicare was enacted that it only makes sense to raise the age at which Medicare begins; with other safety nets and programs in place, only relatively wealthy people would be affected; and, of course, it would save a whole lot of money.
The problem is that all of these things are wrong. Raising the eligibility age is a bad idea.
Disparity in Longevity
It’s a bad idea because it’s a regressive way to cut Medicare. Life expectancy at age 65 has gone up over the past four decades, but it hasn’t gone up equally. A 2007 study showed that while earners in the top half of incomes saw life expectancy at 65 increase more than five years since 1977, earners in the bottom half saw an increase of barely more than a year. So raising the eligibility age likely will result in a significant number of people receiving less years of Medicare overall than people did when the program was enacted. We’re punishing the poor, not correcting for improved health and longevity.
It’s a bad idea because it will raise the number of uninsured dramatically. Stating the obvious, if the Affordable Care Act is repealed and nothing replaces it, then most of those 65- and 66-year-olds won’t be able to get affordable insurance unless they’re employed. Many aren’t.
Even with the law, though, many will become uninsured. The Congressional Budget Office estimates that 95% of affected seniors will be able to get coverage from an employer or through the ACA. But some who qualify for Medicaid will fail to enroll. Some won’t be able to buy health insurance, even with government subsidies. According to estimates from the Kaiser Family Foundation, half of the affected seniors would have incomes too high to qualify for exchange subsidies, and since insurance companies can charge the elderly more under the ACA, their premiums could reach up to $12,000 annually for an individual. Many won’t be able to afford that. Yes, seniors making up to 300% of the federal poverty line may end up paying less, but that’s only one-third of the affected group. The other two-thirds will pay more.
It’s a bad idea because it will be bad for health. Studies have shown that uninsured adults nearly eligible for Medicare often forgo care until they get Medicare and then use more care once they get in. Looking carefully at people just before and after they turn 65, researchers found that uninsured adults with hypertension, heart disease, stroke or diabetes all had significant improvements in health after they got Medicare. Delaying eligibility means delaying these improvements.
It’s a bad idea because it will cost America money, not save it. This is the hardest reason to swallow, but it’s true. The CBO estimates that raising the eligibility age would save the federal government $148 billion through 2021. But that figure doesn’t take into account all the new spending that would occur.
New Spending
The Kaiser Family Foundation examined what would happen in 2014 alone if this idea was put into effect. Washington would see $24 billion in Medicare savings. But it also would see a rise of about $9 billion in Medicaid spending and another $9 billion in subsidy spending, which would reduce the overall savings to about $5.7 billion.
But all those 65- and 66-year-olds need insurance. Those who get it through their jobs would cost employers another $4.5 billion. Others would go to the exchanges. But, ironically, removing these people from the Medicare risk pool and adding them to the exchanges makes both groups less healthy, so everyone’s premiums would go up. This would cost all Americans another $2.5 billion. States have to cover a portion of the new Medicaid spending. That’s $700 million. Finally, there are the out-of-pocket costs to seniors, which may rise by $3.7 billion.
So to save the federal government $5.7 billion, the rest of America has to cough up $11.4 billion. That makes no sense.
As for the idea that encouraging seniors to stay in the workforce longer would boost productivity and make up for some of that pain, I suggest the opposite may be true. We don’t have enough jobs to go around now. By holding on to jobs, seniors would prevent businesses from hiring younger workers, who are cheaper to employ.
Raising the eligibility age is a bad idea. We need a better one.
Dr. Carroll is associate professor of pediatrics and the associate director of Children’s Health Services Research at the Indiana University School of Medicine. He is also the director of the Center for Health Policy and Professionalism Research. Email him at reports@wsj.com.